Artist management agreements series; (part 2) The Term

If the manager and the artist do not know each other well (and particularly if the manager does not have a proven track record and/ or the artist is not yet signed to a record company), it might be a good idea for them to agree to work with each other for a “trial period.” This period may be, for argument’s sake, six months.

While this is no panacea to the ills that might befall the relationship years down the line, it certainly does give the parties an opportunity to size each-other up early on and in a lower-risk environment, and to make decisions from there. Perhaps a second trial period might also be appropriate if the parties are still not certain after the first. Trial periods are no guarantee of a successful management relationship, but are to be encouraged nonetheless.

Alternatively for an artist who does not have a recording agreement, the duration of the manager’s appointment might be applicable for a time, and, at the expiration of that time, renewable only if the manager has performed a required function (e.g. delivered a recording contract with a major). Remember suspensive and resolutive conditions (outlined in the General Principles of contract article series)?

This is a classic example of a resolutive condition. (Put another way, the manager’s contract is terminable by the artist on failure by the manager to perform). If, for example, the manager has been unable to secure a recording agreement within, say, six months of the management agreement being signed, the artist can cancel the agreement. (While the correct legal term for this is “resolutive condition”, the industry calls this an “Escape Clause.”)

Whether or not there is a trial period or escape clause, it is usual for an artist and manager to agree that the manager will manage the artist for a fixed period of time which normally ranges somewhere between three years and five years. This is called the “fixed term.” After the fixed term has elapsed, the parties might renew and extend their agreement or, alternatively, go their separate ways. The fixed term might be supplemented by an option or several options at either the manager’s or the artist’s option.

Often, instead of several one-year options, management agreements will have option periods of two or even three years. But who is given the option to renew? The manager will obviously fight for this right, but in my view it is the artist who should get the right to exercise options. After all, he is, technically speaking, the employer, and it is his career that is at stake. So he should definitely be negotiating for a reasonable fixed term, with several options in his favour.

A common alternative to the above is for the parties to have an “open-ended” contract, whereby they agree that the contract will continue to apply “unless and until either party terminates the term by not less than (say) three months’ notice to the other party. (This so-called “open-ended term” is, from many points of view, the most sensible arrangement, especially where the parties know each-other and have worked together before, because it reflects reality.

I say this, because, if the relationship between the artist and the manager breaks down, it would be better for them to “divorce” rather than one of them being forced to stay “married” by the existence of a fixed term clause). It is important, however, with an open-ended term, for the manager’s entitlement to continuing commission to be properly dealt with. If the manager does not safeguard this, he may suffer arbitrarily as the result of the artist acting in bad faith. If the artist does not address it, on the other hand, he may end up paying the manager for years after they have parted company.

Another variation on the fixed term is to measure it not by reference to a set number of years, but by a so-called “Album Cycle Term.” This is more beneficial to managers than artists, in that such a clause ensures that the manager remains secure in his position and gets at least one album release and tour cycle to prove himself, particularly where the artist takes either a sabbatical or takes a long time between recording albums. Lead-times between albums seem to have become longer and longer, and today, with some artists, not more than one album may be recorded in a period of three years (just look at Guns ‘n Roses for an extreme example – they took over a decade to release “Chinese Democracy.”)

Consequently, in the case of a release-driven artist or band, the duration of the manager’s appointment might be tied to album cycles. For example: “the recording and release of two albums and any concert tours undertaken by the artist to promote such albums...”

Here’s a good one: the artist might want to make either the duration of the fixed term and/or the option conditional on the artist earning a minimum sum of money from his entertainment activities during the fixed term. This is a very good idea. For example, with a solo artist, it might be appropriate for the artist, to require that within the first three years, he must earn not less than say, three hundred thousand Rands’ income per year, failing which the agreement may then be terminated. (This is called a “performance clause.”) The purpose of such a clause is obvious – if the artist does not achieve this minimum level of earnings, one of the reasons for not doing so may be either poor or insufficiently aggressive management that needs to be changed.

Finally, if an artist is dropped by a record company and the manager is unable to sign him to another record company within a fixed period (say, six months), then again the artist might want the option to terminate the agreement so he/she can appoint a new manager who is able to do so. (This is a type of suspensive condition, and is specifically referred to in the industry as a “Break Clause.”)